Welfare-increasing third-degree price discrimination
AbstractThe welfare and output effects of monopoly third-degree price discrimination are analyzed when inverse demand functions are parallel.� Welfare is higher with discrimination than with a uniform price when demand functions are derived from the logistic distribution, and from a more general class of distributions.� The sufficient condition in Varian (1985) for a welfare increase holds for these demand functions.� Total output is higher with discrimination for a large set of demand functions including those derived from strictly log-concave distributions with increasing cost pass-through, such as the normal, logistic and extreme value, and standard log-convex demands.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 652.
Date of creation: 22 Apr 2013
Date of revision:
Third-degree price discrimination; monopoly; social welfare; output;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-04 (All new papers)
- NEP-COM-2013-06-04 (Industrial Competition)
- NEP-IND-2013-06-04 (Industrial Organization)
- NEP-MKT-2013-06-04 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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